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Turbulence in the financial markets is causing factors to be overlooked in corn. One is soils in the Southeast are wet, and rain is in the forecast over the next several days which will keep fieldwork at a minimum. Another is export inspections last week were a marketing year high of 38.4 MB. This was the third week in the last four that a new high has occurred. While this is encouraging, we must ship 45.7 MB each week to reach USDA’s projection of 1.725 BB. However, that is a long shot and will probably not happen. Meanwhile, the funds have been liquidating shorts since late February suggesting they do not expect much more on the downside. Although these developments offer hope, crude oil values falling 57 percent since January could limit corn’s upside potential because of negative margins in the ethanol industry.
Soybeans have been hit hard because of the coronavirus, falling slightly over 15 percent since January. However, it is facing other hurdles as well, namely a large crop in Brazil that is 59 percent harvested, and declining exports. Looking at exports, inspections last week were a marketing year low of 16.0 MB with China being a no show. This is the third week in the past four that they have set a new low. Furthermore, shipments are down 65 percent since they peaked in November. On average, the pace falls between 65-80 percent. On a bright note, the funds have been trimming their short positions since February.
While the corona has impacted wheat, this week’s recovery suggests that it may be divorcing itself from outside influences. Looking at exports, inspections last week were 16.5 MB and below the average of 25.0 MB that must be shipped each week to reach USDA’s target of 1.0 BB. Right now, we are on track for 920 MB. Currently, factors supporting wheat are the crop has come out of dormancy and the funds are holding a modest short position. A final thought on the grains. Equities have been overvalued for the past several years because of the Fed QE program. A 10-year treasury bond currently yields 0.79 percent while a 30-year is 1.37 percent. The wave pattern of the treasuries shows that they will meet a fate similar to equities. That said, there will be nowhere for investors to park their money other than possibly the grains. They will climb out of the hole quicker than the financial markets.
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